Patent Owners Cannot Use Patent law to Enforce Post-Sale Restrictions on Purchasers

A patent owner generally has the right to exclude others from making, using, selling, offering for sale or importing the patented invention. However, these rights cease to exist with respect to a patented product when the "patentee" sells the product to a purchaser. This same understanding was recently confirmed by the US Supreme Court in Impression Products v. Lexmark International, Inc.

Once the patent owner’s rights have been exhausted with respect to that item, the purchaser is free to use and resell the item. The existing case law had established that a patent owner’s rights were not exhausted if (1) lawful restrictions on post-sale use or the ability to resell were clearly communicated to the purchaser, or (2) the patent owner sold the patented product to the purchaser outside of the United States. The Supreme Court reversed these rules, holding that a patent owner’s patent rights are exhausted upon sale of the patented product “regardless of any restrictions the patentee purports to impose or the location of the sale.” 

In an attempt to maintain some control, Lexmark sold its cartridges at two price points: a higher price with no restrictions or a 20 percent lower price if the customer agreed to only use the cartridge once and return the cartridge only to Lexmark (restricted cartridges). Impression Products obtained empty restricted and unrestricted Lexmark cartridges, refilled them and resold the cartridges at a lower price. Impression Products also refilled Lexmark cartridges sold abroad and imported them into the U.S. for sale. 

Lexmark sued Impression Products, asserting that Impression Products violated Lexmark’s lawful prohibition on reuse and resale of the restricted cartridges. Lexmark further asserted that Impression Products infringed Lexmark’s patent rights by importing refilled cartridges because Lexmark’s rights were not exhausted by sale of its cartridges abroad. The Supreme Court reversed the existing rule, indicating that “extending patent rights beyond the first sale would clog the channels of commerce” by muddying title to the item as it moves through those channels. Thus, a patent owner cannot use patent law to impose post-sale restrictions on use or resale on the purchaser – once the patent owner has sold a product, its patent rights in that product are exhausted. The court made clear that patent owners are nevertheless free to place restrictions on sale and use of a patented product through contracts with the purchaser or through licenses. Recourse for any failure to abide by these restrictions, however, would be through contract law and not patent law.

The Supreme Court also held that a sale of a patented product abroad exhausts the patent owner’s patent rights. Using principles of common law and related IP rights, the court determined that as soon as the patent owner or licensee sells a patented product, the purchaser is free to use and resell the product regardless of where the sale takes place.

From now on, patent owners cannot expect to use patent law to impose use or resale restrictions on products sold by the patent owner or its licensee to purchasers. Patent owners must instead look to contract law to attempt to enforce any post-sale restrictions imposed on the purchaser. Moreover, products sold abroad at lower prices may be imported into the United States by the purchaser for resale without fear of infringing the patent.